1. Field of the Invention
This invention relates generally to financial information systems and, more specifically, to a system and method for classifying financial investments according to detailed information characterizing investment securities.
2. Related Art
Each time a security is offered, whether it is a new security or an additional new offering of an existing security, it is referred to as an "issue" in financial parlance. The issue may be in the form of a stock, bond, mutual fund or any other investment product. An investment position represents the number of shares or amount of assets invested in a specific issue. An investment account represents one or more investment positions owned by a single account.
As a method for tracking security issues, Standard & Poor's (S&P) provides a series of unique 8-digit alphanumeric values, one of which values may be acquired by the issuer of a security as a unique permanent identifier. This value is referred to as a Committee on Uniform Securities Identification Procedures number (CUSIP number). Publicly traded issues are identified by CUSIP numbers, and financial institutions maintain the CUSIP number on all applicable investment position records to identify the security owned.
The CUSIP number, by itself, does not provide sufficient information to identify the type of an issue. However, additional information pertaining to the issue can be researched and determined from its offering prospectus. Using this additional information, a security can be classified or grouped.
For example, contemporary financial institutions such as Merrill Lynch use categories to track the types of securities they sell. Each financial institution assigns securities to internally generated categories based on prospectus review. These internal categories are unique to each institution, and assignments are not necessarily consistently made, nor are the categories regularly updated. As a result, coding errors and errors of omission occur. Moreover, certain securities may have to be force-fit into inappropriate categories. A maintainable, verifiable, consistent method for making category assignments would overcome the above-stated problems and would permit cross-industry comparative analysis.
As another example, Lipper Analytical Services has developed a scheme, called Lipper Investment Objectives, which classifies a subset of securities, namely mutual funds (funds), according to each fund's portfolio mix, as specified in its prospectus. The Lipper Investment Objectives permit fund marketers to compare their proprietary funds with others that have similar portfolio mixes. The Wall Street Journal publishes the changes in performance of various categories of Lipper Investment Objectives in the Money and Investing section of its daily newspaper. Because this scheme is not based on CUSIP numbers, but rather issuer name and fund title, it does not permit financial institutions to classify investment positions.
There is a need, therefore, for a process that systematically classifies financial securities based on CUSIP number. Such a process should group investment products into both detailed and general categories such that users can identify narrowly-defined security types, as needed, but also re-combine standard detailed categories into custom product categories suitable to their specific purposes.